OAKLAND Lack of oversight by City Council led to huge overruns, report finds

Published 4:00 am, Tuesday, October 4, 2011

The Fox Theater is pictured on Monday, Oct. 3, 2011, in Oakland, Calif.

The Fox Theater is pictured on Monday, Oct. 3, 2011, in Oakland, Calif.

Photo: Noah Berger, Special To The Chronicle

Image 2 of 4

The Fox Theater is pictured on Monday, Oct. 3, 2011, in Oakland, Calif.

The Fox Theater is pictured on Monday, Oct. 3, 2011, in Oakland, Calif.

Photo: Noah Berger, Special To The Chronicle

Image 3 of 4

A student leaves Oakland School for the Arts, located within the Fox Theater, on Monday, Oct. 3, 2011, in Oakland, Calif.

A student leaves Oakland School for the Arts, located within the Fox Theater, on Monday, Oct. 3, 2011, in Oakland, Calif.

Photo: Noah Berger, Special To The Chronicle

Image 4 of 4

The Fox Theater is pictured on Monday, Oct. 3, 2011, in Oakland, Calif.

The Fox Theater is pictured on Monday, Oct. 3, 2011, in Oakland, Calif.

Photo: Noah Berger, Special To The Chronicle

Oakland auditor: Fox Theater costs poorly screened

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Oakland officials allowed the renovation cost for the $91 million Fox Theater to balloon by $58 million with insufficient oversight or accountability, City Auditor Courtney Ruby said in an audit released today.

The city's portion of the cost grew from a projected $13 million to $52 million over the course of five years under the watch and approval of the City Council, but city staff routinely failed to provide adequate information to the council, Ruby wrote.

She wrote that the council should have been given information so that it could decide whether to reject or modify projects. The council should have received financial analyses of the benefits of particular renovation strategies, Ruby said.

In an interview, Ruby said her audit found "huge breakdowns in communication and transparency."

Among Ruby's findings:

-- The city waived competitive bidding on subcontracts under the promise of greater local business participation, though that never materialized.

-- City staff came to the council for change orders, but did not provide the council with options to modify or reject changes.

-- $180,000 was overpaid to California Capital and the group received an additional $180,000 despite a lack of documentation.

-- At least $2.1 million in change orders were inadequately reviewed.

City Administrator Deanna Santana said through a spokeswoman that she had not yet had time to respond to the final report.

Phil Tagami, managing general partner of California Capital, said that the city had provided Ruby with documentation for payments she said were "unsupported." He also said the supposed overpayment of $180,000 was for work directed by the city.

"We acted per our contract," he said.

Santana sent Ruby the city's written response to the draft report. In it, Oakland says it believes California Capital owes the city some $36,000. Tagami said he would be willing to put that amount into an escrow account and have it resolved by a mediator.

In the written response, the city staff disputed most of Ruby's points, and said Ruby ignored facts and documentation they had provided. Ruby disagreed.

The city says, for example, that the competitive bidding waivers for subcontractors would lower costs and encourage greater involvement of local businesses.

Ruby believes competitive bidding would have reduced costs.

The project required 524 change orders totaling $18.6 million. The audit examined $2.1 million of the change orders in detail.

The audit found that the city did not do independent estimates, didn't negotiate and didn't provide guidance or guidelines to contractors on allowable markups. She also found labor rates in change orders to be excessive.

Ruby did praise California Capital for bringing in $32 million in private financing from Bank of America.

Ruby said the theater is beautiful and acknowledged that it had spurred a revival of the area, which brought a bevy of high-end bars and restaurants to a once dilapidated area. But she said the project nonetheless merits scrutiny for how the city managed public funds and whether there was appropriate oversight.

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